Everything You Need to Know About the Second Round of PPP Funding

ppp • Dec 21, 2020

After months of debate, leaders in Congress finally agreed on a stimulus package yesterday, December 20th. As of Monday evening, the House has passed this bill, and the Senate is expected to pass the bill on Tuesday. Although the full text of the proposed bill has not yet been released, we do know it will include $284 billion for a second round of Paycheck Protection Program funding. Here’s what you need to know about the second round of PPP funding and what we know so far. As we receive more details, we'll update this post. This post focuses on small business and PPP funding, and in tomorrow's post we'll focus on individual benefits and unemployment benefits.

If you're curious about what businesses received funding in the first PPP round, take a look at our PPP loan search.

Can Businesses Get PPP Funding A Second Time?

Small businesses who received PPP funding during the first round of stimulus aid are eligible for a second PPP loan, as long as they meet the eligibility requirements.

Here are the requirements for PPP funding under the new bill:

-Businesses must have a 25% reduction in gross receipts (revenue before subtracting expenses) during one quarter of 2020 as compared to the same quarter of 2019. If the business wasn’t open in 2019, they can compare their receipts in the second or third quarter of 2020 to the first quarter of 2020 to determine if they qualify. Money borrowed, including the first round of PPP funding, will not be calculated into the receipts.

-Businesses must have 300 employees or less. The first round of PPP funding was widely criticized for going to larger businesses, so in this round of funding small and medium-sized businesses will be prioritized.

Will PPP Funds Be Tax Deductible?

One of the major issues for small business owners during the first round of PPP funding was the announcement by the IRS that business owners wouldn’t be able to deduct expenses from their taxes which they used PPP funding to cover. That rule would be changed under the proposed bill, and business owners would be able to deduct their normal expenses from their taxes even if they used PPP funding to cover them. Many small business owners rely on tax deductions to remain financially solvent, so this change is great news for them.

What is the Maximum Funding Businesses Can Get?

Under the first round of PPP funding, businesses could apply for up to $10 million in funding. This round is capped at $2 million, and the amount allocated per business is based on payroll costs (most businesses can apply for up to 2.5 times their monthly payroll costs, and restaurants and food businesses can apply for 3.5 times their payroll costs). Most borrowers will likely receive the same amount of funding this time as they did during the first round.

How Long Do Businesses Have to Use their PPP Funds?

Businesses will have up to 24 weeks to use their funds in order to qualify for complete forgiveness. They will be able to choose any period between 8 and 24 weeks to be their “covered period”, during which they will use the funds on qualifying expenses. Again, this may change when we receive the final SBA rules, since this qualifying period and rules changed in the first go-around as well.

What Expenses Qualify for Forgiveness?

As long as business owners use their PPP loans on "qualifying expenses", they are fully forgivable, making them more like grants than loans. In this round of funding, more expenses are eligible for forgiveness than the first round. 60% of your PPP loan must be spent on payroll, but the other 40% can be spent on mortgage or rent payments, utilities, and now operating expenses, COVID-19 protections for workers and property damage costs.

What Other Help is in the Bill?

This post focuses on the PPP funding, however there is individual stimulus funding of $600 per person set aside, funding for vaccine distribution, $300 enhanced unemployment benefits, benefits for gig workers and freelancers, and eviction moratoriums as well, which we will cover in tomorrow's post.

Conclusion: More PPP Funding is Great News for Small Businesses

Although there are still details we don’t know about the second round of PPP funding, it will provide much-needed relief to small business owners throughout the country. Lawmakers are planning to prioritize smaller businesses in this round of funding, and recipients will be able to deduct their expenses from their taxes. The full text of the bill is likely to be released today, and we will update this post as we know more and once the bill passes.